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Mature consumers empowered by technology.

We'll call her Linda. She's one of your customers. The year Linda was born, 1947, American women had a life expectancy of about 70 years. But Linda does not think of herself as old--in fact, Linda wants to remain active through her seventies and beyond. To her, this age is just one more step on her personal and generational journey of discovery and redefinition, a journey facilitated and enabled by a staggering array of technologies.

What do we actually know about Linda, and how can we get to know her better?

First, she's entering the drug store industry's merchandising "sweet spot." We know, through a 2010 study of prescription purchases conducted by the Harry J. Kaiser Family Foundation, that in cases where patients' ages were known, customers age 65 and over bought 49% of all prescription drugs.

With this kind of size and aggregate spending power, Linda's demographic group is being studied with increasing sophistication.

Linda's generation is one that insists on constantly rewriting the rules. Today's "mature customers" have replaced yesterday's "senior citizens." Their refusal to fit neatly into historically defined behavioral boxes has led many analysts to turn to psychographic segmentation in order to better understand Linda's generation and the generations that immediately precede and follow it. But an even more sophisticated tool--technographic segmentation, or defining a population by the technology it uses--may be needed to help chain drug retailers fully understand how to address the variety of mature consumer subsegments.

Linda and her peers are comfortable using technology. They have adapted on every rung of the technology ladder, from e-commerce to social media. Linda's generation is part of the emerging American consumer group that is truly channel agnostic--a fact that the chain drug industry is scrambling to acknowledge.

Among various technology-enabled retailers looking for ways to grow, CVS/pharmacy, Walgreens and Walmart are building and strengthening their Web channel. Chain drug stores are already finding ways to dovetail certain in-store services--for example, using digital imaging companies such as Shutterfly to replace in-store photo-finishing services.

Amazon and 7-Eleven are collaborating to test an online ordering service, with delivery lockers set up at convenience stores along with smartphone notification when the order is ready for pickup.

Even as we discuss these technological experiments, we have no doubt that brick-and-mortar chain drug stores will remain the dominant channel for serving mature consumers for years to come. Chain drug stores are extremely well positioned to capture the segment of mature shoppers that prefers some or all of its experience to be in-store.

But how these shoppers prefer to engage with the chain drug store may change--and more rapidly than some believe. It will be imperative for retailers to remain flexible, continuously extending and reshaping the platforms and channels through which customers engage with their favorite banners. The challenge will be to clearly define the role of the store and its link to other channels.

Naturally, as larger and larger segments of the mature cohort migrate their general merchandise shopping online and become increasingly comfortable managing their prescription and health data online, chain drug stores will have the opportunity to extend existing customer loyalty to their websites, mobile sites, call centers and other technology-enabled channels. Customer loyalty will have to be earned and re-earned on a frequent basis.

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Mature citizens are a diverse lot--with widely varying socioeconomic and health statuses. There are widows and widowers, empty nesters and, yes, new couples starting families. Learning how to micro-segment the mature cohort isn't easy, or even intuitive. It will require expert data analysis tools, combined with technology-enabled personalized services, to render the kind of emotional, "personal touch" experience mature shoppers have come to expect.

As a group, mature shoppers tend to be wary of advertising. After all, they've had full lifetimes of evaluating one-size-fits-all ads, marketing claims and promotions. So using a subtler form of digital advertising--whether on a website, through a blog or pushed to their smartphone--could be a relatively painless way of gaining their attention. Careful tracking and monitoring of the technology-enabled platforms, media and messaging that work with this segment will go a long way toward personalizing services and disaggregating that monolithic block of mature shoppers.

And we mustn't underestimate the power of social media to communicate with mature consumers. Many of them are moving from a lifestyle with a good deal of direct interpersonal contact to a phase when they may begin to feel socially isolated. Done correctly, digital media is a perfect way to reach these contact-craving shoppers.

Technology will have an impact both on what you sell and on how you sell it. Armed with mobile devices, from today's smartphones and tablets to tomorrow's Google Glasses and beyond, Linda and her peers will increasingly comparisonshop using reviews from blogs and networks such as Angle's List and Yelp to monitor quality, price and peer reviews.

Streaming this type of information into your merchandising strategies will become more and more critical. Reacting to late-breaking information consumers receive will also be part of the new requirement. Retailers and CPG partners will find it essential to collaborate in new ways on such real-time merchandising decisions.

Advances in technology have given us opportunities to provide broader product information to mature shoppers through QR/barcode scanning and reader technologies that increase font sizes, adjust backlighting and, in some cases, actually read information aloud to a user. The same technology that allows an e-book reader to speak could be applied to prescription labels to inform patients about possible negative drug interactions, proper dosages and special instructions such as which drugs should be taken with food. Compliance packaging could make use of consumer technologies that are already widely available, saving chain drug stores from having to invest in centralized repackaging equipment.

Various peer-to-peer reinforcements, some already in use and some still to be explored, may further help mature customers adjust to the reality of worsening medical conditions and serve as an incentive to comply with prescription therapies. Weight Watchers has extended insights about group meetings to social media, gently keeping its members on track with their diet programs. It's a small stretch to imagine allowing interested patients to engage in a social network setting that encourages and incentivizes better compliance.

While it's one thing to have your son or daughter nag you about taking your medication, it's quite another to voluntarily participate in a peer community that provides you with all kinds of information and digital social interaction--and still reminds you to take your pills and watch your diet.

Several back-end technology challenges must be addressed before we can hope to delight Linda and the rest of our mature shoppers through consumer-facing technologies.

As an industry, we need to find ways of monitoring and maintaining comparable service and experience across channels. If we want the reputation of being easy to shop, providing friendly service and focusing on wellness, then we need to deliver integrated and consistent customer experiences and communications across all channels in personalized ways, to each customer. Amazon does this, but in the chain drug sector we still have a way to go before we'll catch up to such personalization.

We need to be able to quickly identify a shopper's stage in the buying process, regardless of channel, in order to deliver seamless service should she choose to switch channels. This requires that we have the ability to transfer customers across channels seamlessly: to chat online and pick up the conversation on the phone, to begin a consultation in-store and rapidly transfer it to a call-center pharmacist specializing in the customer's disease state and/or native language, to begin a targeted promotion purchase for a home-bound senior on a tablet and have the caregiver complete the purchase in-store, to hand off a patient from the pharmacist to the tablet-enabled clerk, who identifies and sells three more in-store products and orders two additional DME mail-order products to be delivered, along with a follow-up phone call from a nurse practitioner to ensure that the equipment is being used properly.

Clearly, the opportunity for expansion lies in the smart use of technology, and in cross-channel sensitivity. Simply forecasting demand and advising on replenishment for established brick-and-mortar stores and distribution centers, as today's supply chain systems do, will no longer be adequate.

Forecasting demand by channel and enabling fulfillment across channels will require upgrading and overhauling current technologies to significantly more sophisticated systems, databases and analyses. And reverse logistics capabilities must improve as our customers order in one channel, receive products in another and return goods to yet another.

Linda and other mature customers will continue to explore and reinvent what aging means in America. At the same time, ff not at the same pace, technology platforms and functions continue to evolve.

Maintaining flexibility in your assumptions both about the market--especially what the consumer wants and how she should be approached--and about all your high-tech, customer-facing systems is now mission-critical.

Todd Huseby is a partner with A.T. Kearney and a member of the retail health practice and strategic IT practice. He is based in Chicago, and can be reached at todd.huseby@atkearney.com. Adam Pressman is a principal with A. T. Kearney and a member of the retail heath and strategic IT practices. He is also based in Chicago, and can be reached at adam.pressman@atkearney.com.
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Author:Huseby, Todd; Pressman, Adam
Publication:Chain Drug Review
Date:May 21, 2012
Words:1554
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